All good things come to an end
The financial markets are by default cyclical. This means that a bear market is never far off. Whether it is caused by the global credit crunch, a dot com bubble bursting, hyper inflation, a world war a downward shirts is rarely more than ten years away. This is a valuable lesson to be learnt about investing in a bear market. What it should do is encourage you to concentrate on the bigger economic picture, not just the individual holdings in your portfolio. Try to benefit in the bull markets and get out early before the bear run takes over.
Hedge Funds in a turbulent market?
In various recent bear markets it has been notable that many hedge funds have made huge profits. This is mainly because hedge funds are more willing to take risks and are equally happy shorting (betting on a downward movement in prices) as investing for growth. In recent years many hedge funds have made huge amounts by betting on the demise of the likes of Northern Rock and Bears Stearns. Investing in hedge funds is not without its risk though. They can offer higher returns but for higher risks so be warned.
During times of market turbulence it has been proved that defensive stocks provide a much safer place for you money than other. These stocks include Energy companies, food producers and retailers and transportation companies. The logic being that these companies sell goods or services that have a relatively constant demand, economic recession or not.
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